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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Bazmataz who wrote (7409)	5/6/1998 12:50:00 PM
From: mc	Read Replies (1) \| Respond to of 14162

Baz, the key thing is to make sure that when you sell a call you pick a strike price you wouldn't mind letting the stock go at. If you're concerned about trying to pick up an extra quarter point here and there, you may want to try some of the more in depth timing methods that Herm and some of the others use here. The two most prevalent are those that I mentioned earlier: Bollinger Bands and RSI. In the second half of last year GLM had a tendency to push the upper bollinger band up until the RSI was above 70. If you think the stock has a chance to to return to that prior form and you don't mind holding it, you may just want to wait to sell the call until you get confirmation by a higher RSI. As I said though, this hasn't been happening this year while it's been in a trading range. Is 3/4 of a point on the number of shares you own worth the effort or will the fees eat up the profit? Also, if you have to sell at 30 is that ok? If you think the stock may trend downward it is best to sell an at the money call, that way you have some downside protection while still being fairly certain that you won't get called out. If this is the case, the 25s are what you're looking for. If you sold the Jun-25 for 1 11/16 and get called, in effect you've sold the stock for 26 11/16. As long as you pick a strike you're happy with 3/4 here and a point there adds up pretty quickly. If you're on margin you'll have an even higher return (of course that works against you as well when you're getting hit). If your focus is to make money on the stock with CCs just adding a little, then July-30 at 3/4 are fine. If you want to make the CCs a primary weapon in your portfolio's arsenal, you'll probably want to be a bit more aggressive. Hey 3/4 of a point every quarter is 3 points a year on a $25 investment. That's 12% while leaving room for a 20% stock appreciation and that's not bad in my book. If you can do that every year you'll be in good shape. Good luck, Gary